Correlation Between GENERAL and CenterPoint Energy

Can any of the company-specific risk be diversified away by investing in both GENERAL and CenterPoint Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GENERAL and CenterPoint Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GENERAL ELEC CAP and CenterPoint Energy, you can compare the effects of market volatilities on GENERAL and CenterPoint Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GENERAL with a short position of CenterPoint Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of GENERAL and CenterPoint Energy.

Diversification Opportunities for GENERAL and CenterPoint Energy

0.77

Correlation Coefficient

GENERAL  CenterPoint Energy

Poor diversification

The 3 months correlation between GENERAL and CenterPoint is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding GENERAL ELEC CAP and CenterPoint Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CenterPoint Energy and GENERAL is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on GENERAL ELEC CAP are associated (or correlated) with CenterPoint Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CenterPoint Energy has no effect on the direction of GENERAL i.e., GENERAL and CenterPoint Energy go up and down completely randomly.

Pair Corralation between GENERAL and CenterPoint Energy

Assuming the 90 days trading horizon GENERAL ELEC CAP is expected to under-perform the CenterPoint Energy. In addition to that, GENERAL is 1.25 times more volatile than CenterPoint Energy. It trades about -0.04 of its total potential returns per unit of risk. CenterPoint Energy is currently generating about 0.16 per unit of volatility. If you would invest  3,216  in CenterPoint Energy on December 25, 2024 and sell it today you would earn a total of  356.00  from holding CenterPoint Energy or generate 11.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	50.85%
Values	Daily Returns

GENERAL ELEC CAP  vs.  CenterPoint Energy

GENERAL ELEC CAP

Risk-Adjusted Performance

Very Weak

Over the last 90 days GENERAL ELEC CAP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GENERAL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

CenterPoint Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CenterPoint Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, CenterPoint Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with GENERAL and CenterPoint Energy

The main advantage of trading using opposite GENERAL and CenterPoint Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GENERAL position performs unexpectedly, CenterPoint Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in CenterPoint Energy will offset losses from the drop in CenterPoint Energy's long position.

The idea behind GENERAL ELEC CAP and CenterPoint Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.